Tuesday , 24 March 2015
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Austerity: Nigerians Faces Bleak Future

An Investment Expert, Mr. Ike Chioke has said that Small and Medium Scale Enterprises (MSMEs) are in for tough times following the increase of the Monetary Policy Rate (MPR) from 12-13 percent by the Central Bank of Nigeria (CBN).

In an exclusive interview, Mr. Chioke noted that the SMEs would further find it difficult to access funds from the banks. According to him, the consequence is that it is likely to stifle economic growth.

The Central Bank of Nigeria recently announced an upward review of the MPR from 12 percent to 13 percent saying the move was to protect the country’s currency which has under severe pressure following the fall in the price of crude oil internationally.

Late November the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala has announced a number of austerity measures to be introduced by the Federal Government as it fights to check the effect of the free fall of the price of crude oil.

This has further led to a reduction in the benchmark of oil price for the 2015 budget from $78 per barrel to $73 and now it had further been reduced to $65 per barrel.

The Managing Director of Afrinvest pointed out that while the Apex Bank is working to protect the foreign reserve, it may have the up intended effect of frustrating economic growth.

“Sadly, SMEs will certainly be affected. Small borrowers, bank customers, all of us will be affected. The big corporates who import goods will try to pass on the burden to the average Nigeria including SMEs.

“You need to find ways to foster economic growth because that is what increases employment and get more people engaged in the system,” he added.

On the austerity measures presently been proposed by the government, Chioke stressed that it can only work when the government leads by example.

He noted that except the government takes the lead the proposed austerity would be an exercise in futility.

“If the Federal Government is willing to show example by belt tightening and dealing with people appropriately who have not paid their taxes, who are not declaring their appropriate income certainly people will fall in line.

“Truly if you see over 100 billionaires who own private jets, how much taxes do they pay? And this is just an example that is visible, then count it across people who have multiple homes, many companies that are earning income.”

“The Minister is correct that is the right thing to do. They have to lead by example.and actually demonstrate it. It is when they have taken those measures that we can see the trickle down effect at the bottom,” he said.

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